Check out the verbiage from the Creditors Committee supporting the restriction of ownership to 4.5% of Preferred Stock! (Page 3, Paragraph 7, LBHI Docket # 7006)
More specifically, Tax Code Sections 382 and 383 imposes restrictions on
the amount of Tax Attributes eligible for future offset purposes that could materially reduce the
benefit of the Tax Attributes unless the Debtors take steps to preserve the value thereof in
advance of confirmation of a plan of reorganization. In this connection, Section 382(l)(5) (the
“(l)(5) Exception”) excepts from application of the aforementioned statutory limitations a
corporation that undergoes an ownership change by reason of the confirmation of a chapter 11
plan of reorganization, if certain conditions, relating primarily to continuity of equity ownership,
are met. To preserve maximum flexibility for the Debtors to qualify for the (l)(5) Exception,
certain procedures are being imposed to allow the Debtors to request that certain creditors sell
down some of their positions if such a sell-down would provide a reorganized Debtor with more
flexibility to use its NOLs and other tax attributes. That ability, which is reflected in the
Procedures, is necessary to prevent certain acquisitions of claims following the date of the
Motion from causing the Debtors to cease to qualify for the (l)(5) Exception and, thus, be unable
to use the Tax Attributes to offset future taxable income to the maximum extent possible.
I am really enjoying the sound of Preferred Stock and Creditors being so carefully worded in the Creditor Committee's support of the Debtors motion!
Coach T
